Why buy in Melbourne?
Melbourne is a hotspot for property investment. Many investors from all over Australia look to Melbourne – the stylish, relevant, and booming metropolis at the heart of Victoria. The reasons for investment are plentiful:
- High population growth: In the 2018-19 financial year, Greater Melbourne increased by 113,500 people (2.3%) to reach 5.08 million. While the recorded population figures are expected to have recently slowed (blame COVID-19), Melbourne will continue leading the charge for Australia’s growing populace.
- Growing infrastructure spend: Melbourne is the target for billions of dollars of infrastructure spend from both local and federal governments. This includes the $10.9-billion Inland Rail project, the $13-billion Melbourne Airport Link, and the whopping $50-billion Suburban Rail Loop.
- Booming economy: Despite COVID-19, Melbourne is known for its buoyant economy. Melbourne’s GDP growth was 4.0% pre-pandemic and contributed 39.8% to Australia’s economy. Whopping figures, which are expected to be seen again in the near future.
What type of property investment?
Many forget that there’s another option to residential property investment. Commercial real estate is growing in popularity for many Melbourne investors, and the reasons make the investment proposition an enticing one.
Melbourne commercial property is in high demand, meaning robust commercial real estate opportunities are hard to find. But if you know where to look, and what asset class to invest in, then your money will be very well-placed.
For example, industrial real estate in Melbourne is poised to be Victoria’s go-to property investment, thanks to its logistics sub-class. Logistics and transport companies are flat tack, distributing goods to a growing population that is using online retail more than any other state in the country. In August 2020, Victoria broke Australia’s eCommerce record. Online spending was up 8.9 per cent higher than 2019’s Christmas period and 5.8 per cent higher than its previous peak in April 2020.
What is a good return for Melbourne property investment?
Residential property in Melbourne will typically provide annual yields of between 1% and 3%. Investors can renovate or use other value-add techniques to see capital growth of up to 30% during, say, a five-year holding period.
Melbourne’s median house value in 2020 was approximately $880,000. This is a more affordable figure than the $910,000 median house value seen a year earlier. Good buying opportunities exist for those who know where to be low and when to sell high.
Commercial real estate investment in Melbourne usually sees much higher annual yields than residential property, providing investors 5% to 8% (and even higher) returns each year. While COVID-19 has caused many investors, both foreign and international, to temporarily remove Melbourne from their sights, educated property investors have the unique opportunity to step into the commercial property buying window not seen in decades.
Where is best to invest in Melbourne?
In Melbourne, it’s east versus west. Melbourne’s west is typically much more affordable for property investors. Suburbs like Point Cook have a very acceptable $646,000 median house value, allowing entry-level investors to partake in the real estate game. And in the south-west, with suburbs like Werribee (30km south-west of Melbourne) offering an incredibly low median house price of $460,000.
The further east an investor looks, the higher prices will go.
East Melbourne is an inner city suburb just a stone’s throw from Melbourne CBD. The median house price is an astonishing $2.1 million and target for those with deep pockets. The median increased 13.9% in the 12 months to November 2020 and the suburbs has provided yields of over 2.5% in the same period. Camberwell is another area in Melbourne’s east decorated with huge homes. Property investment in Camberwell is an average $1.8-million for one of its pristine homes. Median house values have increased 10% in the 12 months to November 2020 and provided a yield of 2%.
The best suburb to invest in Melbourne depends on your own financial situation.
For commercial real estate, West Melbourne is a good place for investors to begin their commercial property investment hunt.
In the last decade, the average annual gross take-up of total Melbourne floorspace has been 700,000 sqm. Led by Melbourne’s West precinct, total floorspace take-up is on its way to 600,000 sqm so far in 2020, with a quarter of the year still remaining. We’re seeing larger-2.5 hectare lots are in high demand.
Investors looking for an industrial property gem will probably find one in Laverton North, “The best industrial precinct in Victoria,” some experts say.
Logistics centres are in huge demand – COVID-19 adding to its popularity – thanks to an increase in eCommerce sales in the state. So, our tip? Industrial real estate, specifically logistics real estate investment, in a West precinct, will likely create a positive investment (if property investment fundamentals are followed).
How to invest in Melbourne property?
Property investors can of course invest alone: Go in fresh and cross their fingers to find the best deal. But smarter investors will leverage expert knowledge.
Property buyers’ agents are popular in Victoria. They use their understanding to help you make good residential property investment choices. However, they don’t have skin in the game. Buyers’ agents don’t invest alongside you, meaning any storm is weathered by you, and only you.
This is why property syndicates are growing in popularity for many Melbourne property investors. A property syndicate is known by many names – property trusts, unlisted property funds, unlisted property trusts. They are run by expert property investors, both in residential property investment and commercial real estate investment. The best property syndicates will invest alongside you in Melbourne property. They’ll have a proven track record, are known for their communication and transparency, and can even guarantee a return on your investment.
For more information and tips on how to invest in Melbourne property in a property syndicate, get in touch with us. We provide high-quality commercial property investment opportunities in Victoria.
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